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Term Loan, SBA Loan. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

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It is written around how a restaurant business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

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Guaranteeing a second lease when the first is already guaranteed

Should you personally guarantee a second lease when the first one is already guaranteed?

Add the two aggregate exposures together before you answer. The combined number is usually several times the business's annual profit.

By Find Me Funders research desk Updated 14 September 2026 944 words 4 min read

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

Should I personally guarantee a second lease when the first one is already guaranteed?

Usually you will have to guarantee it, but not in the form first offered. Add the remaining rent on both leases to see the real exposure — in an illustrative case, 303,400 left on lease one plus 1,458,205 over a ten-year second lease is over 1.7 million of contingent liability. Negotiate the form instead of the fact: a good-guy clause limiting exposure to the notice period, a burn-down that reduces the guarantee after a period of on-time payment, a cap stated in months of rent, or a cash-collateralised letter of credit in place of the guarantee.

Landlords ask for a full personal guarantee on the whole term because it costs them nothing to ask. The question is not whether to give one — on a second site, with a business that has limited balance sheet, you will usually have to — but which of five forms you give, and whether you have added up what you are already carrying.

Add it up first

Illustrative only —lease one has 41 months remaining at 7,400 a month: 303,400. Lease two is ten years at 10,600 a month with 3 per cent annual escalation: 1,458,205.

Combined contingent exposure: 1,761,605.

That is the number a guarantee on the full term creates. It is not a prediction — a landlord has a duty to mitigate in most jurisdictions and would relet — but it is the ceiling, and it is the figure that appears as a contingent liability on your personal financial statement when you apply for anything else.

Compare it to the annual profit of the business. If the company earns 210,000 a year, you have signed personally for the equivalent of eight years of total profit to secure premises.

The five forms, weakest to strongest for you

1. Full guarantee for the full term.What is offered. Avoid if there is any alternative.

2. A capped guarantee.Liability limited to a stated dollar amount or a stated number of months of rent. Simple, enforceable, and the easiest ask to make because the landlord still has recourse. Twelve months of rent on lease two is 131,016 at the year-three rate — a fraction of 1,458,205.

3. A good-guy guarantee.Common in some markets. You remain personally liable for rent only until you vacate, give the agreed notice, hand back the keys and are current on rent to that date. It converts an open-ended term liability into a notice-period liability — six months' notice on lease two is 63,600. In exchange, the landlord gets a clean surrender rather than a fight. Read the conditions precisely: leaving the space in a stated condition, no subtenants, all charges paid. Failing any condition can revive the full guarantee.

4. A burn-down or step-down guarantee.The guarantee reduces over time or against performance: full for two years, then 12 months of rent, then six, then nothing, provided no default has occurred. This is the structure to ask for when the landlord's concern is early failure, which it usually is.

5. A letter of credit or security deposit instead.You post cash or a bank-issued letter of credit for a set number of months. Six months at 10,600 is 63,600 of cash collateral, and an issuance fee at an illustrative 1.5 per cent is about 954 a year. The exposure becomes finite and known. The cost is that the cash is frozen, or that the letter of credit consumes bank facility capacity you might want for the build-out.

What to negotiate alongside the form

Release on sale. If you sell the business, does the guarantee transfer with an acceptable assignee, or do you remain liable after you no longer own the company? Negotiate a release conditioned on the assignee meeting stated financial tests.
Carve out the guarantee from the escalations. A guarantee capped at "twelve months of rent" should specify which year's rent.
Spouse signature. Landlords sometimes ask. In community property states this has real consequences. Push back, and get advice before agreeing.
Separate guarantees, not joint and several across both leases. Make sure signing for site two does not amend or cross-default to the guarantee on site one. Read the new document for any reference to other agreements.
Notice to guarantor. Require that you receive copies of all default notices sent to the tenant. Guarantors have been surprised by accumulated arrears they could have cured.

What it does to your borrowing

Lenders record contingent liabilities on the personal financial statement. A large lease guarantee reduces the guarantee capacity available for the loan you are taking out to fund the build-out, and it affects the global cash flow analysis if the lender chooses to include the lease payments. Disclose it — the lease will be reviewed anyway, and a guarantee discovered by the lender rather than disclosed by you is a credibility problem on top of a numbers problem.

If you are also giving a personal guarantee to the lender funding the site, you now have two personal exposures secured by the same business, and they will both be called in the same bad scenario.

The decision procedure

Compute the aggregate remaining exposure on every lease and guarantee you have already signed. Write the total down.
Add the proposed new exposure at full term with escalations.
Compare the total to your net worth outside the business, not to the business's value, because in the scenario where the guarantee is called the business is worth little.
Ask for, in this order: a good-guy clause, a burn-down, a cap in months of rent, a letter of credit in substitution. Ask for all four in one message; you will get one or two.
Get any agreed limit into the guarantee document itself, not into the lease recitals or a side letter.
Have a lawyer read the final guarantee, separately from the lease. The guarantee is a different contract with a different signatory, and it is usually the shortest document with the largest number on it.

Refuse a guarantee that survives a sale of the business with no release mechanism, and refuse to sign one that references your existing lease without understanding exactly what the reference does.

Where this applies